The Federal Trade Commission cannot tell you whether a particular multilevel marketing plan is legal. Nor can it give you advice about whether to join such a plan. You must make that decision yourself. However, the FTC suggests that you use common sense, and consider these seven tips when you make your decision:
- Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.
- Beware of plans that ask new distributors to purchase expensive inventory. These plans can collapse quickly -- and also may be thinly-disguised pyramids.
- Be cautious of plans that claim you will make money through continued growth of your "downline" -- the commissions on sales made by new distributors you recruit -- rather than through sales of products you make yourself.
- Beware of plans that claim to sell miracle products or promise enormous earnings. Just because a promoter of a plan makes a claim doesn't mean it's true! Ask the promoter of the plan to substantiate claims with hard evidence.
- Beware of shills -- "decoy" references paid by a plan's promoter to describe their fictional success in earning money through the plan.
- Don't pay or sign any contracts in an "opportunity meeting" or any other high-pressure situation. Insist on taking your time to think over a decision to join. Talk it over with your spouse, a knowledgeable friend, an accountant or lawyer.
- Do your homework! Check with your local Better Business Bureau and state Attorney General about any plan you're considering -- especially when the claims about the product or your potential earnings seem too good to be true.